Taxes and 403(B) Retirement Account


Z

zkeith

I have a 403(B) retirement account with my wife as my beneficiary.
I'd like answers to the following questions using the assumption that
I die before she does:

1. Will she be taxed at the same rate on the distributions from this
retirement account as we are while I'm living (making the adjustment
for her status as being "single" rather than "married filing jointly"?

2. My wife is 2 years younger than I am. Will the RMD be adjusted to
reflect her remaining life expectancy at the time I die, or will the
RMD continue to be calculated on my remaining life expectancy although
I'm not longer living?

3. If I should die before I turn 70.5, does she have until she
reaches 70.5 to begin the RMD?

4. If she were to take any money out before she reaches 70.5, does
that count toward the first year's RMD?
 
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P

Phil Marti

zkeith said:
I have a 403(B) retirement account with my wife as my beneficiary.
I'd like answers to the following questions using the assumption that
I die before she does:

1. Will she be taxed at the same rate on the distributions from this
retirement account as we are while I'm living (making the adjustment
for her status as being "single" rather than "married filing jointly"?
Distributions are "ordinary" income, meaning that they get lumped with all
the other income she has for the year of distribution. There's no special
rate.
2. My wife is 2 years younger than I am. Will the RMD be adjusted to
reflect her remaining life expectancy at the time I die, or will the
RMD continue to be calculated on my remaining life expectancy although
I'm not longer living?
A spousal beneficiary can elect to treat the account as her own or as
inherited. See IRS Publication 575 for the differences.
 
S

sfcnm-mtm

Distributions are "ordinary" income, meaning that they get lumped with all
the other income she has for the year of distribution.  There's no special
rate.


A spousal beneficiary can elect to treat the account as her own or as
inherited.  See IRS Publication 575 for the differences.
1. This is a 403(b), not an IRA. Therefore, the applicable IRS
Publication is Pub 571.
2. A surviving spouse can not treat it as if it was her own retirement
plan.
3. It is highly likely that the plan contains a clause that requires
the plan balance be distributed to the beneficiary within a relatively
short time.
3. The surviving spouse can avoid being taxed on distributions by
rolling it over into her own IRA.
4. Once in her own IRA, then the normal rules for minimum
distributions from your own IRA apply.
 
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H

HW \Skip\ Weldon

1. This is a 403(b), not an IRA. Therefore, the applicable IRS
Publication is Pub 571.
2. A surviving spouse can not treat it as if it was her own retirement
plan.
3. It is highly likely that the plan contains a clause that requires
the plan balance be distributed to the beneficiary within a relatively
short time.
3. The surviving spouse can avoid being taxed on distributions by
rolling it over into her own IRA.
4. Once in her own IRA, then the normal rules for minimum
distributions from your own IRA apply.
Thank you for an excellent post. I was not aware of this important
difference between 403b and 401k/IRA.



-HW "Skip" Weldon
Columbia, SC
 

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